In 2019, Vietnam’s Fintech market witnessed an explosion of funding flows with two major deals for VNPay (USD 300 million) and MoMo (USD 100 million). These two deals are ranked as the region's largest and third largest, as of September 30, 2019.
As of September 30 Vietnam ranked second in ASEAN in terms of cash flow into fintech, accounting for 36% of regional fintech investment in 2019, second only to Singapore (51%), according to the report co-conducted by PricewaterhouseCoopers (PWC), United Overseas Bank (UOB) and Singapore Fintech Association.
The interest in investing in Vietnamese fintech companies, and especially in the payment field, is driven by the business potential with large population size, relatively favorable market, as well as high Internet and mobile penetration rates.
This trend is in line with the government's effort to turn Vietnam into a cashless economy and promote mobile and digital payments. According to the State Bank of Vietnam, as of March 31, 2019, the number of financial transactions performed on mobile phones nearly doubled compared to 2018. The mobile payment market in Vietnam is expected to reach USD 70.9 billion in 2025, an increase from USD 16 billion in 2016, according to research by Allied Market Research.
As of September 30, 2019, there had been 136 fintech companies established in Vietnam, following Singapore (1,157), Indonesia (511) and Malaysia (376). Unsurprisingly, payment is the most developed segment, with about 35 companies, according to Fintech Startup Vietnam Map 2019. Notable projects and platforms include MoMo, a M_Service mobile payment platform and one of the most fintech-funded startups in Vietnam; Moca, a mobile payment service integrated into the Grab app; and Zalo Pay, a service integrated into Vietnam's popular messaging platform Zalo. Peer-to-peer lending (P2P) is another prominent segment with more than 20 companies including Tima, a consumer finance and P2P lending platform; Growth Wealth, a P2P lending platform for small and medium enterprises (SMEs) in Vietnam, as well as TrustCircle and Vay Muon.
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The State Bank of Vietnam is also studying the sandbox mechanism to regulate Fintech, allowing startups and financial services companies to experiment with innovative business solutions and models in a controlled environment. The plans also include the development of guiding regulations, especially in the field of P2P lending, to encourage industry growth.
According to Pham Xuan Hoe, Deputy Director of the Banking Strategy Institute, Vietnam's Fintech market will be worth USD 9 billion in 2020, becoming ASEAN's fourth largest market.
However, so far, Vietnam has not had an appropriate Fintech management policy. According to Lawyer Phung Anh Tuan, Vice Chairman and General Secretary of Vietnam Association of Financial Investors (VAFI), the State currently has two main legal documents to manage Fintech field, namely the Decree No. 101 (2012) of the Government on Non-cash payment and Circular 39 (2014) guiding intermediary payment services. However, the above two legal documents are not sufficient to cover and keep up with the development of the Fintech field.
The Vice Chairman and General Secretary of VAFI also frankly pointed out that the current policy orientation of the state is still about strengthening management, tightening control with Fintech rather than creating conditions for it to develop.
According to economist Vo Tri Thanh, former Deputy Director of the Central Economic Institute, the State is quite confused in choosing between strictly controlling a new field to limit risks or unbridling to promote innovation. An example to illustrate this is that after 10 drafts, the Ministry of Transport has not yet "closed" a reasonable plan to manage technology taxis and traditional taxis in a reasonable and fair manner.
Because it is "revolutionary", it is necessary to "break the old to build a new one". But "breaking the old one" is related to the issue of costs and benefits, while the "new one" also has things we do not know, so it is not easy whatsoever. There are too many related parties. Banking and finance are areas with specific characteristics, not applicable under the Business Law. While businesses can do everything that is not banned, Banking and Finance is not allowed to do so.
The banking and finance industry often thinks about risks first, then benefits, because if there are risks, the spillover effects will be very large.
As the Vietnamese dongs is not a convertible currency (currency widely used to pay for international transactions and is traded in the key foreign exchange markets), there will be difficulties opening the balance of payments internationally.
Mr. Varun Mital - Vice Chairman of Singapore Fintech Association mentioned a factor hindering investment activities for Fintech enterprises in Vietnam. It is a policy that limits the investment of foreign financial funds, currently at 30% - 49%. We all know that the development of Fintech businesses is still largely based on foreign investment. Fintech startups need foreign investments to develop human resources, technology and markets since domestic resources are not qualified. Mr. Mital warned that if the management agency keeps the approach too cautiously, Fintech Vietnam will fall into the middle group and cannot reach its full potential.
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Compiled by VietnamCredit